A distinctive solution for your plan and employees TIAA-CREF Lifecycle Funds
TIAA has nearly 100 years of experience managing money for retirement and nearly 60 years of asset allocation experience. Our target-date strategies are designed to meet specific retirement objectives and to generate meaningfully differentiated outcomes. Experience and scale Dedicated team averaging 27 years of investing experience. Leveraging decades of experience in multi-asset and income-generating solutions. Multiple levels of risk management Diversification across and within asset classes. Fund due diligence at the individual security level. Outcome-based focus Optimize savings outcomes at retirement. Maximize probability of sustaining various income levels in retirement. Competitive fees Active Fund fees in the bottom quintile vs. industry peers 1 Index Fund fees in the bottom 3% percent vs. industry peers 1 A compelling target-date fund solution for retirement readiness
Target-date funds: Rising demand and critical need Target-date funds have rapidly become an essential tool to help plan sponsors prepare their employees for retirement. These age-appropriate allocation funds are designed to automatically meet a range of needs: Broad investment diversification, risk management and asset allocation that becomes more conservative as employees approach retirement. The simplicity of target-date funds requiring only one decision to select a diversified, age-appropriate portfolio offers a solution for many employees: Those seeking a simple solution and professional management of their investments, and others who may be overwhelmed by investment choices or unengaged. As a plan s default option, these funds offer fiduciaries reassurance that even employees who avoid any decision still can receive the benefits of their retirement plan. But target-date funds are not all the same their design and impact on retirement readiness can vary significantly. With rapid adoption and widespread usage, particularly among younger employees, plan sponsors have a vital interest in understanding key differences and choosing the product best suited to their employees. Consider: Lifecycle Funds offer a simple, one-decision solution for age-appropriate diversification. Usage increasing rapidly Younger age groups Majority of contributions The share of participants contributing to target-date funds in TIAA retirement plans increased to 53% in 2016, from 42% in 2013. Fully 75% of participants under age 35 contributed to target-date funds in 2016 as compared to 66% in 2013. Users allocate 69% of their contributions to these funds. Participants under age 35 invested 90% of their plan contributions to target-date funds. TIAA-CREF s Lifecycle Funds offer distinct advantages: Asset allocation glidepath designed for longer lifespans Data reflect participants in TIAA retirement plans as of 12/31/2016. Overall, TIAA s target-date offering the Lifecycle Funds represents a compelling choice for plan sponsors, offering a distinctive combination of benefits for employees. Comprehensive risk management framework Strong risk-adjusted returns Very low fees For institutional and financial advisor use only TIAA-CREF Lifecycle Funds 1
A distinctive glidepath design With decades of experience, TIAA Investments designed the Lifecycle Funds to increase the potential for employees to reach their retirement savings goals. Their innovative glidepath design reflecting changes in the investment mix over time factors more than 90 years of market history. The glidepath also considers the future, modeling expected returns for each asset class and various market scenarios. Investment allocations are designed to address longevity risk given today s longer life expectancies. The glidepath takes into account employees income levels, savings rates and eventual withdrawal needs. All of the allocations are stress-tested to account for the potential impact of major market disruptions and investors likely responses to market volatility. Our proprietary glidepath approach is designed to maximize accumulations and provide an extended period of income during retirement years. As a result of our research, the Lifecycle Funds have higher exposure to equities during the retirement phase than many competing funds. At the target date, the Lifecycle Funds equity allocation is 45%, declining to 35% after 10 years for the rest of retirement (see chart below). Higher equity exposure is designed to provide sufficient growth for retirements lasting up to 30 years or more to help minimize longevity risk and inflation risk, among other risks. The Lifecycle Funds are an important component of TIAA s comprehensive advice offering for plan participants. Informed decisions on asset allocation, risk management and the age appropriateness of a portfolio are built into the glidepath s proprietary design. This embedded advice frees participants from having to make investment decisions on their own. Asset allocation glidepath for TIAA-CREF Lifecycle Funds Higher equity allocations early on are designed to create greater value in later years. 100% 80 Inflation-Protected Assets Short-Term Fixed Income Allocations % 60 40 20 Fixed Income Direct Real Estate International Equity U.S. Equity 0 45 40 35 30 25 20 15 10 5 0-5 -10 Years to Retirement Lifecycle Funds balance market and longevity risks for long-term potential. Glidepath profile allocations 2 Years to Retirement Equity Fixed Income Real Estate 45 95.0% 0.0% 5.0% 25 90.0% 5.0% 5.0% 15 72.0% 22.0% 5.0% 0 45.0% 50.0% 5.0% -10 and beyond 35.0% 60.0% 5.0% 2 TIAA-CREF Lifecycle Funds For institutional and financial advisor use only
Direct real estate allows for improved risk-adjusted returns Until recently, no target-date mutual fund offered exposure to direct real estate a separate asset class with investment characteristics distinct from equity and fixed income. Direct investment in real estate offers the potential to improve risk-adjusted performance and retirement savings outcomes of target-date funds. Potential benefits of adding direct real estate Reduce volatility: Stability derived through rental income from property leases; not publicly traded; allows closer tie to fundamentals of underlying properties vs. macro factors. Enhance diversification: Lower correlations with stock and bonds, with greater potential to reduce risk then REITS. Improve performance: TIAA research shows that a 5% allocation improves risk-adjusted returns and retirement accumulations in most scenarios, while also reducing risk. 4 Hedge Inflation: Direct real estate is a natural hedge against inflation, with commercial rents and property values highly correlated to rising prices. TIAA is the first mutual fund target-date manager to incorporate direct real estate into its allocation. 3 Comprehensive risk management framework Many target-date funds manage risk by diversifying the set of underlying funds across a broad range of asset classes. But TIAA takes risk management even further in several respects. First, our actively managed funds employ an additional layer of diversification by combining underlying funds that use different management approaches. Some funds use the fundamental research of our industry analysts to select stocks, while others use quantitative modeling techniques. These two distinct methods pick stocks that tend to have low correlations and different performance patterns. Combining the two investment styles in a single portfolio can help to enhance diversification, reduce volatility and improve risk-adjusted returns over time. Second, we use an innovative risk budgeting framework to manage overall risk levels. Our portfolio managers set specific risk limits a risk budget for each Lifecycle Fund. They monitor the underlying mutual funds and adjust investment exposure to ensure that no single fund contributes more than 25% of the risk budget. Limiting risk contributions of each underlying fund helps to manage overall risk levels within desired ranges. Finally, our Lifecycle Fund allocations are regularly adjusted to stay on target. On a monthly basis, the management team rebalances the relative weight of each fund s holdings to within about 1% to 2% of its target allocation. This discipline helps to reduce vulnerability to market bubbles and prevents the funds risk profiles from drifting. For institutional and financial advisor use only TIAA-CREF Lifecycle Funds 3
Strong risk-adjusted returns Winner of the Thompson Reuters Lipper Best Mixed Asset Fund award two years in a row. 6 TIAA s Lifecycle Funds have earned high ratings from Morningstar, based on their risk-adjusted returns: 100% of the actively managed fund series and 100% of the index fund series received overall ratings of 4 or 5 stars, as of 9/30/2017. 5 (For the active funds, the ratings include 100% 5 star. For the index funds, the ratings include 50% 5 star and 50% 4 star.) Morningstar ratings account for the amount of risk taken to achieve the level of returns. High performance Rated 4 or 5 stars by Morningstar: 100% of actively managed Lifecycle Funds 100% of Lifecycle Index Funds Very low costs When it comes to expenses, TIAA offers among the lowest costs in the industry and low fees keep more of participants money working for them. THOMSON REUTERS LIPPER FUND AWARDS 2016-2017 BEST MIXED ASSETS LARGE FUND COMPANY 2 CONSECUTIVE YEARS The Thomson Reuters Lipper Mixed Assets Large Fund Award is based on a review of 39 companies 2015 and 36 companies 2016 risk-adjusted performance. The actively managed series of Lifecycle Funds have lower expenses than 83% of their peers, ranking in the bottom 17% within their respective Morningstar categories. 1 The Lifecycle Index Funds have lower expenses than 98% of their peers, ranking in the bottom 2% within their respective Morningstar categories. 1 TIAA-CREF Lifecycle Funds Actively managed series Indexed series Average expense ratio 1 0.42% 0.10% Percentile ranking vs. industry peers More choices for plan sponsors Bottom 17% Bottom 2% Complete series of actively managed and index Lifecycle Funds TIAA Investments is among few providers offering two distinct fund management options active and index allowing plan sponsors to choose the one most appropriate for their employees. The two approaches enable investors to: 1. Pursue above-benchmark returns with actively managed funds, or 2. Track market returns with index funds, which also offer lower costs. (While index funds are designed to track the performance of the indexes they follow, investors generally will not meet or exceed the index performance after fees are deducted.) 4 TIAA-CREF Lifecycle Funds For institutional and financial advisor use only
Multiple options from an experienced asset manager As a Fortune 100 global asset manager, TIAA Investments is renowned for its capabilities in investment research, risk management and product innovation. As an organization, we have nearly 100 years of experience helping participants reach their retirement goals. The Lifecycle Funds are among TIAA Investment s full range of investment products for retirement readiness, including annuities offering the potential for guaranteed lifetime income. A compelling target-date fund solution for retirement readiness Contact your TIAA relationship manager or plan consultant to learn how our Lifecycle Funds can offer a distinctive combination of benefits for your employees. The research is sound, and the series also benefits from attractive fees and a long-tenured management team. Morningstar Target-Date Fund Series Report September 30, 2017 Call us at 888-842-7782 Visit us online at TIAA.org For institutional and financial advisor use only TIAA-CREF Lifecycle Funds 5
An established global leader TIAA is a global investment manager dedicated to helping institutional, intermediaries and individual investors achieve their goals. Today, we manage more than $900 billion in assets with a long-term perspective and deep experience across a wide range of traditional and alternative asset classes. 7 1. Source: Morningstar Direct, 9/30/17 institutional share class. 2. Source: TIAA Investments. The chart represents the strategic asset allocation progression of one of a series of multi-asset class portfolios with target retirement dates at 5-year intervals. Asset allocations represent the exposures sought at the given number of years before the maturity of the fund and are not actual mutual fund exposures. Allocations are presented for information only and may not represent the actual allocation at the time of investment. 3. Based on an internal survey of U.S. target-date mutual funds as described in publicly available prospectuses. 4. Performance data are based on quarterly total returns, 1/1/1978 12/31/2016, using allocations of the TIAA-CREF Lifecycle Funds glidepath, rebalanced monthly. 5. Morningstar Rankings based on total returns. Rankings refer to the institutional share class only. Rankings for other time periods may not be as favorable. 6. The Lipper Large Fund and the Mixed-Assets Large Fund Awards are given to the group with the lowest average decile ranking of three years Consistent Return for eligible funds over the three-year period with at least five equity, five bond, or three mixed-asset portfolios. Note these awards pertain to mutual funds within the TIAA-CREF group of mutual funds; other funds distributed by Nuveen Securities were not included. From Thomson Reuters Lipper Awards, 2017 Thomson Reuters. All rights reserved. Used by permission and protected by the Copyright Laws of the United States. The printing, copying, redistribution, or retransmission of this Content without express written permission is prohibited. Past performance does not guarantee future results. Certain funds have fee waivers in effect. Without such waivers ratings could be lower. For current performance, rankings and prospectuses, please visit the Research and Performance section on TIAA.org. Nuveen Securities, LLC, member FINRA and SIPC. TIAA-CREF Individual & Institutional Services, LLC, Teachers Personal Investors Services, Inc., and Nuveen Securities, LLC, members FINRA and SIPC, distribute securities products. 7. As of 6/30/2017 This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy or sell securities, and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Financial professionals should independently evaluate the risks associated with products or services and exercise independent judgment with respect to their clients. Morningstar ratings are based on each mutual fund (institutional share class) or variable annuity account s (lowest cost) share class and include U.S. open-end mutual funds, CREF Variable Accounts and the Life Funds. The Morningstar Rating or star rating is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. The rating is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. Morningstar ratings may be higher or lower on a monthly basis. The top 10% of funds or accounts in each product category receive five stars, the next 22.5% receive four stars and the next 35% receive three stars. The overall star ratings are Morningstar s published ratings, which are derived from weighted averages of the performance figures associated with the three-, five-, and 10-year (if applicable) Morningstar rating metrics for the period ended September 30, 2017. Morningstar is an independent service that rates mutual funds. Past performance cannot guarantee future results. For current performance and ratings, please visit TIAA.org/public/investmentperformance. 81% of TIAA-CREF mutual fund products and variable annuity accounts have expense ratios that are in the bottom quartile (or 98.14% below median) of their respective Morningstar category. Our mutual fund and variable annuity products are subject to various fees and expenses, including but not limited to management, administrative, and distribution fees; our variable annuity products have an additional mortality and expense risk charge. Source: Morningstar Direct, September 30, 2017. From Thomson Reuters Lipper Awards, 2017 Thomson Reuters. All rights reserved. Used by permission and protected by the Copyright Laws of the United States. The printing, copying, redistribution, or retransmission of this Content without express written permission is prohibited. Certain funds have fee waivers in effect. Without such waivers ratings could be lower. For current performance, rankings and prospectuses, please visit the Research and Performance section on TIAA.org. The target date is the approximate date when investors plan to start withdrawing their money. The principal value of the funds is not guaranteed at any time, including at the target date. Portfolios are subject to certain risks such as market and investment style risk. Please consider all risks carefully before investing. Target-date mutual funds share the risks associated with the types of securities held by each of the underlying funds in which they invest. Diversification is a technique to help reduce risk. There is no guarantee that diversification will protect against a loss of income. The risks associated with investing in direct real estate include, among other things, fluctuations in property values, higher expenses or lower income than expected. You should consider the investment objectives, risks, charges, and expenses carefully before investing. Before investing, please advise your clients to carefully consider fund investment objectives, risks, charges, and expenses. For this and other information that should be read carefully, please request a prospectus or summary prospectus from your Advisor Consultant at 877-518-9161 or log on to TIAA.org for product and fund prospectuses that contain this and other information. Please read the prospectuses carefully before investing. Nuveen, LLC, formerly known as TIAA Global Asset Management, delivers the expertise of TIAA Investments and its independent investment affiliates. Nuveen Securities, LLC, member FINRA and SIPC, is a subsidiary of Nuveen, LLC. TIAA-CREF Individual & Institutional Services, LLC, Teachers Personal Investors Services, Inc., and Nuveen Securities, LLC, Members FINRA and SIPC, distribute securities products. 2017 Teachers Insurance and Annuity Association of America-College Retirement Equities Fund, 730 Third Avenue, New York, NY 10017 For institutional and financial advisor use only 263489 141024905 169944-INAD-Y06/18 717712_822333 A14348 (11/17)